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Bill would allow gradual utility rate increases: Mississippi Power wants to build plant -------------------------------------------------------------------------------- Mar 2 - McClatchy-Tribune Regional News - Megha Satyanarayana The Sun Herald, Biloxi, Miss. A bill in the state Senate could give utility regulators the power to authorize gradual rate increases for customers as Mississippi Power plans what it calls the first and largest eco-friendly, continuously operating, coal-burning plant north of Meridian in Kemper County. Currently, the Public Service Commission allows utility companies such as Mississippi Power to increase rates to recoup building costs only when it "flips the switch," on new plants. The price surge is often a "rate shock," to consumers, said PSC Southern District Commissioner Leonard Bentz. Senate bill 2793 would change that, giving PSC the authority to let utilities recoup costs during construction through incremental rate increases. Mississippi Power officials say this is the only way they can get financing for the $2-billion, high-tech plant. The bill passed through the Senate last week, and is now in the House Public Utilities Committee. Last week, the House killed its own version of the bill. Bentz said rate changes require two of the three commissioners' approval, and he is neither for or against the bill. He likes the idea of gradual increases if they protect consumers from larger hikes, but the power to set rates must remain solely in PSC's jurisdiction and not through government mandates, he said. Mississippi has not built continuously running, or "baseload" power plants since the 1970s and 1980s, said Mississippi Power CEO Anthony Topazi. The state's growth and increased usage demands a new plant, he said. The estimated $2 billion cost would be spread over five years of construction. Of the various energy sources, he said, coal is the most practical in the long run, but they have not completely ruled out nuclear energy or petroleum sources. He said the cost of the plant is more than he believes lenders would commit if they won't be repaid until electricity starts flowing around 2013, hence his support for the legislation, and any subsequent PSC-approved incremental rate hikes. "This is absolutely good public policy for my consumers," he said. There is concern from consumer advocates that if the project stops before completion, whether through a decision of Mississippi Power or a government shutdown, consumers will have paid upfront for nothing. Topazi said that is unlikely to happen, because the company could not afford the loss of its own, $1 billion capital investment in the project. Bentz said he'd like to see penalties if any such interruption occurred. "(I am) not for a utility company earning a rate of return on that money. It's not fair, and it's not right," he said. The proposed plant would run on gasified lignite, a poor-grade coal with lower burning capacity than its higher-grade cousins. The gasification method mixes coal at high temperatures with oxygen to create a high-energy, efficiently burning fuel. The Kemper County mine would be run by North American Coal, which already runs a lignite mine near Ackerman, in Choctaw County. Through Department of Energy tax incentives totaling $133 million, Mississippi Power is developing the technology to use large-scale coal gasification to create power, and to capture the carbon dioxide byproduct of coal combustion for injection into salt domes. The salt domes need not be dissolved, and if possible, he said, Mississippi Power would like to sell the carbon dioxide. Oil companies often use carbon dioxide to push petroleum upward to make old, abandoned oil wells produce again. "It would be an opportunity to show a clean application of coal," he said. Clean coal is a misnomer to many environmental organizations, because coal releases more greenhouse gasses than any other fuel source. Carbon sequestration underground has gained popularity in the energy industry because it keeps greenhouse gasses out of the air. But as the amount of stored carbon reaches into billions and trillions of metric tons, conservation groups worry that even small leaks could cause climate change. But serious political opposition to the bill in the state Legislature is more likely to come from oil and gas interests than environmental. Thus far, there has been little oil opposition to the bill, said Sen. Bob M. Dearing, chair of the Senate Oil and Gas Committee. Chevron spokesman Steve Renfroe in Pascagoula said he is still reviewing the bill and had no comment. Bentz, Dearing and Topazi all agree that more electricity is needed to meet the demands of a growing state and to make prices more palatable for industry. But even if the bill passes, said Bentz, the PSC may not authorize rate changes. He said the commission has to balance the needs of utilities versus the needs of the rate payers. TOP --------------------------------------------------------------------------------